Find out the information on how you can get a mortgage without a credit score.
Find out how you can still get a mortgage without credit score by reading the information below.
If you are planning to mortgage a home, the first thing that most lending companies will check is the credit score. Now for people with no history yet, it may be hard for them to obtain a mortgage. But, the good news is, there are still some things that you can do for you to be able to get a mortgage.
Getting a Mortgage Without Credit Score
The first thing that you need to do is to ask the landlord to report utility and housing payments to one of the credit agencies. You can also ask the Federal Housing Administration or a credit union for a mortgage.
Government Loan
You can get government loans for as long as you don't have any delinquency on your rental payments. It would also be best if you don't have any collection accounts except incidents that are related to medical. Lastly, the debts that you have should not total 43% or more of the total income that you have.
Explanation of credit score ranges
It is important to know the category that you fall into when it comes to credit score for you to be aware. The range of a credit score can go from 300 to 850. Always remember that the higher your score, the higher the chances of you to qualify for a loan. There will also be instances where a financing company is okay with 650 scores, while the other is fine with a 750 score. It will all depend on the lender itself.
A lender or a bank will check your credit score if you qualify for the application that you are requesting. Here are some of the credit score ranges that you should know.
Bad credit score
People with a credit score below 579 is known as high risks. Foreclosures, poor payment history, and bankruptcies are the reasons why people fall into this category.
Good credit score
A good credit score ranges from 680 to 719. People with this credit score can expect approvals and interest rates that are better.
Very Good
A very good credit score ranges from 720 to 799. People with this credit score is known to be small risks, and they often get loan amounts that are higher than usual.
Excellent
An excellent score ranges from 800 and above. Financial freedom is expected to people with this score.
How are credit scores calculated?
The weight of each of the five categories are; 30% of amount owned, 10% is for the new credit, 15% accounts for the length of credit history, 10% is the credit mix and the last 35% accounts for the person's payment history.
The FICO score takes into consideration positive as well as negative aspects of the credit report. The percentage or the weight of any of the categories mentioned above may differ from a person to another depending upon the information available in the credit report.
The FICO score takes all of the information from your credit report. However, the banks or any other lending institution might look at your income, type of credit and employment history when you apply for a loan or mortgage.
Once a certain lender asks for a client's credit report, they can also ask for the Fico score. Other sources say that your Fico score will include 35% of your payment history, 30% of your credit utilization, and 15% as to how long have you been borrowing.
Mortgage options based on credit score
A high credit score shows high creditworthiness and a lower credit score shows lower creditworthiness. The credit score consists of credit-related information such as your credit payments history, outstanding debts etc. The banks and the lending institutions will be most willing to lend you if you have an excellent credit score that is, over the 720 mark.
However, if you have a lower credit score, you might want to check with the FHA loans or other non-conventional means of getting credit. If you have a low score, you may get a mortgage from the bank, however, you will be asked to pay higher amounts of the interest rate on the loan amount.